FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
QUARTERLY REPORT UNDER SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended April 26, 1997
Commission File No. 0-11682
S & K FAMOUS BRANDS, INC.
................................................................................
(Exact name of registrant as specified in its charter)
Virginia 54-0845694
.................................... ......................................
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
11100 West Broad Street, P. O. Box 31800, Richmond, Virginia 23294-1800
................................................................................
(Address of principal executive offices)
Registrant's telephone number, including area code: (804) 346-2500
........................
Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934
during the preceding 12 months (or for such shorter period that the Registrant
was required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
------ ------
Indicate the number of shares outstanding of each of the Registrant's classes of
common stock as of April 26, 1997.
5,055,508 shares of Common Stock, $0.50 par value
<PAGE>
<TABLE>
PART I. FINANCIAL INFORMATION
Item 1. FINANCIAL STATEMENTS
S & K FAMOUS BRANDS, INC.
Statements of Income
(in thousands, except per share amounts)
(unaudited)
<CAPTION>
Three Months Ended
-----------------------------------
April 26, April 27,
1997 1996
-------------- --------------
<S> <C>
Net sales ......................................................... $ 33,460 $ 31,449
Cost of sales ..................................................... 17,573 17,050
-------------- --------------
Gross profit ...................................................... 15,887 14,399
Other costs and expenses:
Selling, general and administrative ............................ 13,388 12,288
Interest ....................................................... 83 128
Depreciation and amortization .................................. 568 565
Other, net ..................................................... (26) (56)
-------------- --------------
Income before income taxes ........................................ 1,874 1,474
Provision for income taxes ........................................ 712 560
-------------- --------------
Net income ........................................................ $ 1,162 $ 914
============== ==============
Net income per common share ....................................... $ 0.23 $ 0.18
============== ==============
Weighted average common shares outstanding ........................ 5,068 5,063
============== ==============
See notes to financial statements.
2
<PAGE>
S & K FAMOUS BRANDS, INC.
Balance Sheets
(In thousands, except share and per share amounts)
(unaudited)
<CAPTION>
April 26, April 27, January 25,
1997 1996 1997
------------- ------------- --------------
Assets
Current assets:
Cash ................................................. $ 332 $ 120 $ 537
Accounts receivable.................................... 377 1,012 398
Merchandise inventories................................ 49,577 46,429 41,511
Other current assets................................... 2,246 2,322 2,295
------------- ------------- --------------
Total current assets.............................. 52,532 49,883 44,741
Property and equipment, at cost:
Land and corporate facility............................ 5,123 5,125 5,123
Furniture, fixtures and equipment ..................... 11,766 10,991 11,596
Leasehold improvements................................. 12,602 11,875 12,396
------------- ------------- --------------
29,491 27,991 29,115
Less: Accumulated depreciation and amortization....... 14,915 13,143 14,360
------------- ------------- --------------
14,576 14,848 14,755
Other assets ............................................. 2,978 2,475 2,933
------------- ------------- --------------
$ 70,086 $ 67,206 $ 62,429
============= ============= ==============
Liabilities and Shareholders' Equity
Current liabilities:
Current maturities of long-term debt .................. $ 180 $ 180 $ 180
Accounts payable ...................................... 13,262 12,203 5,699
Accrued expenses:
Compensation-related items...................... 675 1,090 2,211
Current and deferred income taxes............... 1,070 1,027 1,339
Other current liabilities....................... 1,512 1,524 1,508
------------- ------------- --------------
Total current liabilities....................... 16,699 16,024 10,937
Industrial Development Revenue Bond....................... 2,115 2,295 2,160
Long-term debt............................................ 3,874 6,328 3,020
Deferred income taxes..................................... 1,214 1,214 1,203
Commitments
Shareholders' equity:
Preferred stock, $1 par value; authorized shares, 500,000;
issued and outstanding shares, none
Common stock, $.50 par value; authorized shares,
10,000,000; issued and outstanding shares,
5,055,508, 5,066,371 and 5,066,371, respectively 2,528 2,533 2,533
Capital in excess of par value......................... 7,732 7,837 7,837
Notes receivable--Stock Purchase Loan Plan............. (1,354) (1,445) (1,377)
Retained earnings...................................... 37,278 32,420 36,116
------------- ------------- --------------
46,184 41,345 45,109
------------- ------------- --------------
$ 70,086 $ 67,206 $ 62,429
============= ============= ==============
See notes to financial statements.
3
<PAGE>
S & K FAMOUS BRANDS, INC.
Statements of Cash Flows
Increase (Decrease) in Cash
(in thousands)
<CAPTION>
Three Months Ended
---------------------------------------
April 26, April 27,
1997 1996
-------------- -------------
Cash flows from operating activities:
Net income...................................................... $ 1,162 $ 914
Adjustments to reconcile net income to net cash
(used for) provided by operating activities:
Depreciation and amortization................................ 658 668
Loss on property dispositions, net........................... 33 8
Other........................................................ 36 33
Changes in assets and liabilities:
Accounts receivable....................................... 22 (402)
Inventories............................................... (8,066) (6,727)
Other current assets...................................... 49 (22)
Other assets.............................................. (44) (99)
Accounts payable and accrued expenses..................... 6,103 5,982
Income taxes and deferred income taxes.................... (258) 30
-------------- -------------
Net cash (used for) provided by operating activities............ (305) 385
-------------- -------------
Cash flows from investing activities:
Capital expenditures............................................ (513) (433)
-------------- -------------
Net cash used for investing activities.......................... (513) (433)
-------------- -------------
Cash flows from financing activities:
Net borrowings (paydowns) under revolving bank lines of credit 818 (307)
Reduction of long-term debt..................................... (45) (45)
Repurchase of common stock...................................... (160) 0
-------------- -------------
Net cash provided by (used for) financing activities............ 613 (352)
-------------- -------------
Net decrease in cash............................................... (205) (400)
Cash at beginning of period........................................ 537 520
-------------- -------------
Cash at end of period.............................................. $ 332 $ 120
============== =============
Supplemental cash flow information: Cash paid during the period for:
Interest..................................................... $ 84 $ 124
Income taxes................................................. 982 534
See notes to financial statements.
4
</TABLE>
<PAGE>
S & K FAMOUS BRANDS, INC.
Notes to Financial Statements
(unaudited)
A. Accounting Policies
The accompanying unaudited interim financial statements have been prepared
by the Company in accordance with the regulations of the Securities and Exchange
Commission in regard to quarterly reporting. In the opinion of the Company, the
statements include all adjustments, consisting only of normal recurring
adjustments, which are necessary for a fair representation of the financial
position and results of operations for interim periods.
B. Interim Results of Operations
The Company's business is highly seasonal, with peak sales periods
occurring during its fourth fiscal quarter which includes the Christmas season.
The net earnings of any interim quarter are seasonally disproportionate to net
sales since administrative and certain operating expenses remain relatively
constant during the year. Consequently, interim results should not be considered
necessarily indicative of the results for the entire fiscal year.
C. Expansion
Since January 25, 1997, the Company has opened four new stores totaling
17,490 square feet. The store in North Little Rock (4,500 square feet) was a
relocation and conversion into a superstore.
<TABLE>
<CAPTION>
<S> <C>
S & K Store Locations Date Opened Square Footage
- ------------------------------------------------- ------------------------------- ----------------------------
Arkansas: North Little Rock February 28, 1997 5,040
Michigan: Jackson April 25, 1997 3,160
Okemos (E. Lansing) May 21, 1997 * 5,685
North Carolina: Rocky Mount February 27, 1997 3,605
</TABLE>
* Store opened in second quarter.
5
<PAGE>
Item 2. MANAGEMENT'S DISCUSSION AND FINANCIAL REVIEW
Information regarding forward-looking statements.
The statements contained in this quarterly report that are not historical
facts, including statements about management's expectation for fiscal 1998 and
beyond, may be forward-looking statements. The forwardlooking statements are
subject to certain risks and uncertainties which could cause actual results to
differ materially from historical results or those anticipated. Readers are
cautioned not to place undue reliance on these forward looking statements.
Factors that could cause the Company's actual results to differ materially from
management's projections, forecasts, estimates and expectations include, but are
not limited, to those discussed in the Company's Annual Report on Form 10-K.
Three Months Ended April 26, 1997, Compared to Three Months Ended April 27, 1996
RESULTS OF OPERATIONS
The following table sets forth certain items in the Statements of Income
as a percentage of net sales for the three months ended April 26, 1997 and April
27, 1996.
<TABLE>
<CAPTION>
Percentage of Net Sales
------------------------------
Three Months Ended
------------------------------
4/26/97 4/27/96
------- -------
<S> <C>
Net sales ..................................... 100.0% 100.0%
Cost of sales ................................. 52.5 54.2
----- -----
Gross profit .................................. 47.5 45.8
Other costs and expenses:
Selling, general and administrative ......... 40.0 39.1
Interest ................................... .3 .4
Depreciation and amortization ............... 1.7 1.8
Other, net .................................. (.1) (.2)
----- -----
Income before income taxes .................... 5.6 4.7
Provision for income taxes ................... 2.1 1.8
----- -----
Net income .................................... 3.5% 2.9%
===== =====
</TABLE>
Net sales in the first quarter of fiscal 1998 increased 6%, or $2.0
million, over the same period last year, and reflects the net addition of nine
new stores. Excluding the volume in the three former Menswear Mega Centers (MMC)
which were closed in August, 1996, net sales increased 14%. Comparable store
sales were up approximately 6%. These increases were primarily attributable to
strong sales in the suit and sportcoat categories. During the first quarter the
Company opened three new stores and closed one. There were 196 stores in
operation as of April 26, 1997, compared to 187 stores at April 27, 1996.
Cost of sales in the first quarter of fiscal 1998 was 52.5% of net sales
compared to 54.2% of net sales for the same period last year. This 1.7% of net
sales reduction was primarily due to the lack of lower margin MMC sales this
year.
6
<PAGE>
Selling, general and administrative expenses in the first quarter of
fiscal 1998 were 40.0% of net sales compared to 39.1% of net sales in the
previous year. This .9% of net sales increase was primarily attributable to the
lack of lower overhead MMC sales this year.
Interest expense was .3% of net sales in the first quarter of fiscal 1998
compared with .4% of net sales last year. This .1% of net sales improvement is
primarily attributable to reductions in average borrowing levels from $5.9
million in fiscal 1997 to $2.8 million this year.
LIQUIDITY AND CAPITAL RESOURCES
The Company has funded its operating activities, including capital
expenditures for the opening of new stores, from internally generated funds and
from bank borrowings. During the three months ended April 26, 1997, the Company
opened three new stores and closed one. The Company plans to open a number of
new stores in fiscal 1998, while also remodeling several others. The Company
believes that its sources of liquidity and capital resources will continue to be
sufficient to fund its operations and capital expenditures.
Operating activities used net cash of $.3 million and provided net cash of
$.4 million during the first quarters of fiscal 1998 and 1997 periods,
respectively. This fluctuation was primarily attributable to the timing of
inventory purchases this year versus last year.
Net cash used for investing activities was primarily for the purpose of
store openings and remodelings. Capital expenditures for the first quarter of
fiscal 1998 and 1997 approximated $.5 million and $.4 million, respectively. The
Company opened three new stores in the first quarters of both fiscal 1998 and
fiscal 1997.
Financing activities provided net cash of approximately $.6 million in the
first quarter of fiscal 1998 and used net cash of approximately $.4 million last
year. Financing activities primarily relate to fluctuations in the borrowing
levels under the Company's revolving credit agreements and, to a lesser degree,
the Company's repurchase of its Common Stock. The Company's revolving credit
agreements with two banks aggregate $25.0 million. As of April 26, 1997, the
Company had net unused commitments of approximately $22.2 million under the
agreements.
7
<PAGE>
PART II. OTHER INFORMATION
Item 2. Changes in Securities
(a) During the quarter ended April 26, 1997, the Company contributed
5,137 shares of its common stock to the S&K Famous Brands
Employees' Profit Sharing/Savings Plan. The contribution was
exempt from registration pursuant to section 3 (a) 2 of the
Securities Act of 1933, as amended, because the Plan does not
permit employee contributions to be invested in the Company's
securities.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
(27) Financial Data Schedule
(b) There were no reports filed on Form 8-K during the three months
ended April 26, 1997
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
S & K FAMOUS BRANDS, INC.
-------------------------
(Registrant)
Date: May 22, 1997 /s/ Robert E. Knowles
---------------------
Robert E. Knowles
Executive Vice President,
Chief Financial Officer,
Secretary and Treasurer
(Principal Financial Officer)
Date: May 22, 1997 /s/ Janet L. Jorgensen
----------------------
Janet L. Jorgensen
Vice President and Controller
(Principal Accounting Officer)
8
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JAN-25-1997
<PERIOD-START> JAN-26-1997
<PERIOD-END> APR-26-1997
<CASH> 332
<SECURITIES> 0
<RECEIVABLES> 377
<ALLOWANCES> 0
<INVENTORY> 49,577
<CURRENT-ASSETS> 52,532
<PP&E> 29,491
<DEPRECIATION> 14,915
<TOTAL-ASSETS> 70,086
<CURRENT-LIABILITIES> 16,699
<BONDS> 0
0
0
<COMMON> 2,528
<OTHER-SE> 43,656
<TOTAL-LIABILITY-AND-EQUITY> 70,086
<SALES> 33,460
<TOTAL-REVENUES> 33,460
<CGS> 17,573
<TOTAL-COSTS> 17,573
<OTHER-EXPENSES> 13,930
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 83
<INCOME-PRETAX> 1,874
<INCOME-TAX> 712
<INCOME-CONTINUING> 1,162
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,162
<EPS-PRIMARY> 0.23
<EPS-DILUTED> 0.23
</TABLE>
